INVESTMENT CONSIDERATIONS

GOVERNMENT POLICY

Foreign investment is welcomed when it introduces foreign capital, management and technology and makes a contribution to Fiji Island's economic and social development. Joint ventures are encouraged in order to stimulate local entrepreneurship. The requirements for foreign investments are that they: introduce adequate funds for their projects; pay a fair price for assets acquired locally; do not have a debt to equity ratio greater than 3:1; and are generally expected to finance fixed assets from overseas sources. In addition, lenders in the Fiji Islands require Exchange Control approval from the Reserve Bank to make loans to non-resident investors.

RESTRICTIONS ON FOREIGN INVESTMENT

The Fijian Government treats local and foreign investors alike and allows investment to be market driven. In general there is little distinction between the form and conduct of a foreign-owned business and one that is locally owned. Essentially, conditions placed on investment by the Fiji Islands Government are designed to ensure that the investment is desirable for Fiji Islands in terms of its development, existing resources and investment potential.

Foreign investment is encouraged and unrestricted in all sectors of the economy other than those which have been reserved for Fiji Islands' nationals under the Reserved Listing, or those where foreign investors must meet certain conditions prior to investment as stated in the Restricted Listing. These two lists form an integral part of the Foreign Investment Regulations 1988. Investors, whether foreign or local are not allowed to invest in prohibited activities. The list of prohibited activities can be obtained from the Fiji Trade and Investment Board.

TRANSFER OF CAPITAL AND PROFITS

There are no restrictions on the remittance of profits and retained earnings, including investment capital and capital gains, for all business entities with non-resident shareholders. Under the existing guidelines, Commercial Banks may authorise remittances up to F$500,OOO per application without prior reference to the Reserve Bank. The amount to be remitted must be covered by a tax clearance certificate trom the Inland Revenue Department. Payments in excess of F$500,OOO must be referred to the Reserve Bank for approval. In the case of the payment of profits and/or retained earnings the Reserve Bank reserves the right to stagger large payments if necessary. Repatriation of capital profits and the withdrawal of investments by non-residents is restricted to F$5,OOO,OOO per annum. Repatriation of dividend profits is restricted to three years retained earnings per annum if not , previously remitted. For applications that exceed these amounts the application must be accompanied by a tax clearance certificate and Board resolution for the dividend payment and supported by the company's latest audited accounts.

TAXATION

Company tax is charged at 20 percent. Value Added Tax (VAT) of 12.5 percent is taxed on all economic activity - VAT is a consumption tax. Withholding tax of 15 percent is imposed on payments of interest and dividends for overseas investors.

A person resident in the Fiji Islands is liable to income tax on total income derived from sources both within and outside of Fiji Islands. A person is resident in Fiji Islands if:

• his domicile is in Fiji Islands, unless the Commissioner is satisfied that his permanent place of abode is outside Fiji Islands; or
• he has actually been in Fiji continuously or intermittently during more than one half of the income year unless the Commissioner is satisfied that his usual place of abode is outside Fiji Islands and he does not intend to take up residence in Fiji Islands.

Company Tax
The resident and non-resident company tax rate for 2002 will be at 32 percent and from 2003 onwards it wiil be at 30 percent. The tax year usually runs trom 1 January to 31 December although alternative fiscal years are permitted.

INVESTMENT PROTECTION

INVESTMENT INCENTIVES

• Hotels (Hotels Aid Act) investment allowance;
• Supportive Projects to the Tourist Industry Investment Allowance;
• Tourist Vessel Investment Allowance;
• Short Life Investment Package (SLIP) for investment over US$20 million and half SLIP package for investment between US$5 million and US$20 million;

Five Star Hotel
• No corporate tax on profits for 20 years
• Losses carried forward to 6 years
• 100 percent write-off on all capital expenditure in anyone year during a period of 8 years or spread over a series of years within the same period
• duty free import of all capital equipment, machinery and plant
• the tourist plant will be allowed to generate its own power supply and sell any excess electricity to the Fiji Electricity Authority
  
  
• Short Life Investment Package(SLIP)
  20 year tax holiday and customs duty exempt on capital, plant, machinery, equipment and building materials where investment exceeds $40 million
  1/2 SLIP
  10 year tax holiday and customs duty exempt on capital, plant, machinery, equipment and building materials where investment range between $10 million to $40 million

Tourism Vessels Investment Allowance
• A sea vessel constructed in Fiji costing a minimum of $250,000 and principally for carriage of tourists may entitle the owner to set off 55% of the costs of construction against income from the vessel. If allowance unutilised after 3 years, it may be set off against income of other ships or income from other tourist activities carried on by the vessel owner

Tourism:Supportive Projects Industry Allowance
• A cost write off of 55% may be allowed to a taxpayer for supportive projects to the tourist industry

Tourism:Supportive Accelerated Depreciation Allowance
• Projects for approved hotel building or expansion may be entitled to receive an investment allowance whereby in addition to normal depreciation, 55% of approved capital expenditure, excluding cost of land, may be set-off against the hotel owner's taxable income

The following duty concessions are granted to new hotel/resort development:

• 10% fiscal and 10% VAT on furniture, furnishing and fittings not produced or manufactured locally
• 10% fiscal and I0% VAT on equipment including front office equipment and room amenities not produced or manufactured locally
• 10% fiscal and 10% VAT on buildings materials not produced and manufactured locally
• 10% fiscal and 10% VAT on all water sports equipment including specialised vessels not able to be made locally
• 10% fiscal and 10% VAT on heavy mobile machinery/plant for site/project work provided the machinery and equipment are re-exported at the end of the project
• 10% fiscal and 10% VAT on uniforms for hotel staff
• 10% fiscal and 10% VAT on boats/vessels imported for tourist cruises
• 10% fiscal and 10% VAT on room amenities such as bath robes, slippers, stationery, coat hangers and other items normally placed in hotel rooms for the convenience of guests
• 10% fiscal and 1 0% VAT on cutlery and other kitchen and dinning room equipment and utensils for initial establishment of the resort
• 10% fiscal and 10% VAT on working gear such as boots, safety goggles, leather gloves, welder's aprons, etc
• 10% fiscal and 10% VAT on tools and maintenance equipment Items of expandable nature such as screws, rivets, glue, contact cement, etc., are excluded
• 10% fiscal and 10% VAT yachts imported by wholly foreign owned charter companies with intention to re-export the yacht within 3 years
• yachts imported temporarily for charter purposes by wholly foreign owned operator will be allowed concessionary duty rates of 10% fiscal and 10% VAT under Code 115 in part 2 of the Fiji Customs Tariff
• Substantial duty concessions are available under Code 122 of the Customs Tariff on items such as refrigerators, air conditioners, washing machines, etc. this applies to existing hoteliers as well

CONTACTS FOR FURTHER INFORMATION